Police identified the man responsible for Friday's attack as 30-year-old Hassan Khalif Shire Ali and said he was radicalised and inspired by the terrorist group's propaganda.

Local media showed footage of a large man slashing wildly at police officers before being shot.

MELBOURNE:

A Somali-born man who set fire to a truck laden with gas cylinders in the centre of Melbourne and fatally stabbed one person was inspired by ISIS but did not have direct links with the group, Australian police said on Saturday.

Police identified the man responsible for Friday's attack as 30-year-old Hassan Khalif Shire Ali and said he was radicalised and inspired by the terrorist group's propaganda. He was shot by police and died in hospital.

Police said Shire Ali's Australian passport was cancelled in 2015 after an intelligence report he planned to travel to Syria, but an assessment was made that while he had radical views, he posed no threat to national security.

"I think it is fair to say he (Shire Ali) was inspired. He was radicalised," Australian Federal Police Acting Deputy Commissioner Ian McCartney told reporters in Melbourne.

"We're not saying there was direct contact. We're saying it was more from an inspiration perspective."

Prime Minister Scott Morrison said the national terrorism advisory remained at "probable", the midpoint of a five-tier system, and told reporters in Sydney that radical Islam was the issue.

"I need to call it out. Radical, violent, extremist Islam that opposes our very way of life. I am the first to protect religious freedom in this country, but that also means I must be the first to call out religious extremism," he said.

RUSH HOUR ATTACK

Friday's attack began just before the evening rush hour and lasted only minutes. Shire Ali stabbed bystanders and attacked police while his utility truck carrying barbecue gas cylinders burned on busy Bourke Street.

The cylinders did not explode and the fire was put out in 10 minutes, by which point the attack was over, though not before one man was fatally stabbed.

Police said he was a 74-year-old man who worked in the city, but did not release his name. Local media identified him as a restaurant owner.

"This shouldn't happen in a city like Melbourne," one witness who had returned to the scene on Saturday told Reuters, crying. "I just want to forget it," she said.

Video posted to Twitter and broadcast on television showed Shire Ali swinging a knife at two police officers, while the truck burned in the background, before he collapsed when one shot him in the chest.

Victoria state police said counter-terrorism investigators were searching two properties in suburban Melbourne in connection with the attack, but there was no immediate word on what the searches yielded.

At one, a modest one-storey brick house on the city's western fringe, armed officers wearing masks stood guard outside.

Bourke Street also reopened on Saturday morning, and a Reuters reporter said there was an increased police presence in the area.

A staunch U.S. ally, Australia has been on alert for such violence after a Sydney cafe siege in 2014, and its intelligence agencies have stepped up scrutiny. Victoria Police Commissioner Graham Ashton said there was no warning of the latest attack.

He said there was no longer a threat to the public, but that security would be boosted at horse races and Remembrance Day memorials over the weekend.

Authorities say Australia's vigilance has helped foil at least a dozen plots, including a plan to attack Melbourne at Christmas in 2016 and a plan to blow up a flight from Sydney to Abu Dhabi using a bomb disguised as a meat mincer.

Two hostages were killed during the 17-hour Sydney cafe siege by a "lone wolf" gunman who was inspired by ISIS terrorists.